Are blockchain-based DAOs really a utopian revolution in the making? | John Naughton

In 1982, a guy called Benjamin Hoff, who was then employed as a tree-pruner in the Portland Japanese Garden in Oregon, published a charming little book, The Tao of Pooh, in which he argued that AA Milne’s bear had ways of doing things that appeared to echo some of the principles of Taoism, the ancient Chinese philosophy. Taoism teaches the various disciplines for achieving perfection through self-reflection, and one of its central concepts is that of pu – The idea that you should always be open to, but unburdened by, experience.

The Tao of Pooh was a runaway success, spending 49 weeks on the New York Times‘s bestseller list. This has given this newspaper columnist, whose occupation is even humbler than that of tree-pruner, an idea for a new, timely bestseller, the title of which – The Dao of Blockchain – neatly embodies two buzzwords for the price of one.

Let me explain. A DAO is a Decentralised Autonomous Organization, defined by Wikipedia as “an organization represented by rules encoded as a computer program that is transparent, controlled by the organization members and not influenced by a central government, in other words they are member-owned communities without centralized leadership ”. Or, in plain English, a new way of building enterprises that are democratically governed by a community of users.

The novelty comes from the fact that DAOs are powered by the other obsession of the day, blockchains, distributed ledgers secured by cryptography. There is something quaint about the current hysteria around blockchains, in that they embody a touching belief that software will somehow provide a remedy for the untrustworthiness of people, institutions and government in our modern world.

Still, DAOs rely on blockchains to securely hold the so-called “smart” (ie self-executing) contracts that codify the rules of the organization – rules that can only be changed through voting mechanisms in which all members of the DAO can participate. So the computer code of the blockchain is the law governing the DAO, and since the code is supposed to be open-source, everyone can inspect it to see that no funny business is going on. To which the only sensible response is: really?

Despite that, and a number of high-profile scandals and hacks, DAOs appear to be proliferating like rabbits. There are DAOs for (among other things) media, operating systems, “social” (whatever that means), protocols, collectors, services, investment and grants, etc.

Not everyone is impressed by this Gadarene rush, however, chief among them financial regulators. Exhibit A in this context is American CryptoFed DAO, which bills itself as “a monetary system with zero inflation, zero deflation and zero transaction costs” and “the first Wyoming DAO”. According to the New York Times“Just four months after the launch of American CryptoFed DAO, which planned to create a crypto payment system, the Securities and Exchange Commission in November effectively shut it down, saying the enterprise was ‘materially misleading’ the public with contradictory filings that failed to disclose key information such as audited financial statements. ”

Ah, those tiresome “audited financial statements”, those weary relics of the analogue world. In fact, reading the Securities and Exchange Commission’s ruling, it’s difficult to see how any DAO could actually meet the requirements of any financial regulator, anywhere, at the present time. There’s a lovely passage in the ruling that illustrates this. It reads: “The individuals and entities to whom American CryptoFed planned to distribute Locke tokens are not employees of American CryptoFed, as the Form 10 [a filing with the SEC] itself said that American CryptoFed will not have any employees but instead ‘will be operated automatically by smart contracts and direct voting by Locke tokens’. ” The regulator and the regulated inhabit different legal universes.

And yet there’s something touching about the DAO idea. It seeks to break the stranglehold of hierarchical organizations dominated by a few and replace them with more democratic structures. In that sense, they’re reminiscent of 1960s and 1970s attempts to create communes for breaking the grip of the nuclear monogamous family and creating more collegial structures for domestic life. Those experiments often broke up because the alpha males could not hack real egalitarianism. And DAOs are now riven by similar conflicts. The only difference is that some members are more equal than other, not because of gender but because they own more of the cryptocurrency tokens and can therefore determine what happens. The more things change, the more they remain the same.

This article was amended on 12 March 2022 to correct the publication date of The Tao of Pooh to 1982.

What I’ve been reading

Ukraine explained
Lawrence Freedman, the great scholar of warfare, has written an unmissable analysis of the Russian invasion so far, called Space and Time, on his site Comment Is Freed.

Boot camp
If, like me, you’ve been wondering what it must be like to suddenly become a soldier, then War 101, the guidance from an unnamed American combat veteran on the Cosmopolitan Globalist site, may be helpful.

No filter
Drew Austin’s Substack, Kneeling Bus, has a lovely essay on “the millennial aesthetic” and how Instagram has transformed the physical world, called I Can See It (But I Can’t Feel It).



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